• Friday, March 29, 2024
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BusinessDay

Mobile money can be a win-win for banks and telcos in Nigeria

mobile money

Mobile money as used in some African countries is as simple as it sounds, yet, capable of very sophisticated applications. In Ghana for instance, it has applications from purchasing treasury bills, Initial Public Offerings (IPOs), health insurance, to even the basic money transfers and digital service payments.

Mobile money in Ghana has gone beyond just achieving financial inclusion. It has also immensely redefined consumerism and flow of money within the $47 billion economy. At the end of 2017, mobile money transactions hit $32 billion, according to data by the Bank of Ghana, a figure that represents 68 percent of the country’s GDP.

Users not only get to deposit and withdraw via mobile money, but there is also provision for interest accruals, between 1.5 per cent and 7 per cent as approved by the Ghanaian Central Bank, subject to whatever each telecommunications company can negotiate with each partner bank. In the 2017 State of the Industry Report on Mobile Money by GSMA, it was noted that the 2015 regulatory guidelines from the Bank of Ghana have allowed customers to accrue interest on mobile money deposits, resulting in exponential growth in total deposits in that market.
Mobile money is however not functioning in isolation of the formal financial sector, that is, commercial banks. At least in Ghana, mobile money is linked to banks, as different telecommunication companies work out modalities with partner banks. For the mobile money agents, they also have to visit a bank in order to get ‘eCash’ for their mobile money accounts. Without visiting the bank, they cannot get it, ensuring the banks benefit from the system.

The mobile money system is bridging the gap between the banked and the under-banked population while providing convenience in transactions. Registered mobile money accounts in Ghana are now 23.9 million out of an estimated 28 million population. At the end of 2017 the Bank of Ghana in its report, stated there were 11.1 million active mobile money accounts. The number of registered mobile money accounts, at 23.9 million is almost double the number of bank accounts, which was 12.5 million in 2017. The active registered agents of the three (3) mobile money operators (MMOs) in 2017 stood at 151,745 and showed a growth rate of 41.27 percent over the previous year’s position of 107,415.

Despite this, banks do not appear to consider the mobile money system as a threat. The financial service providers have buy-ins structured into the operation of the mobile money system, which invariably makes it beneficial to them.

Ghana’s central bank in a 2017 report even alluded that “The growth in mobile money emanated from productive collaboration between mobile money operators and banks.”
The volume of mobile money transactions soared from 266.2 million in 2015, to 550.2 million in 2016, and the growth continued in 2017 with a 78.4 percent increase to 981.5 million transactions. Similar growth has been occurring in value of mobile money transactions, from GH¢ 35.4 billion in 2015, growing to GH¢78.5 billion in 2016, and then a 98.51 percent growth to GH¢ 155.8 ($32 billion) in 2017.

While cheques continued to be the major non-cash retail payment instrument in terms of values of transactions, value of cheques cleared as a percentage of total value of non-cash retail payments dropped from 60.21 per cent in 2016 to 49.33 percent while value of mobile money grew from 31.02 per cent in 2016 to 42.81 per cent in 2017. The volume of mobile money transactions represented 97.50 per cent of total volume of non-cash retail payments.
However, in terms of value of transactions undertaken in 2017, cheques continued to maintain its lead with GH¢179.6billion ($36 billion), while mobile money followed closely with GH¢155.8 billion ($32 billion).

Despite the best efforts by the Central Bank of Nigeria, the country largely remains a cash based society. With mobile money however, the CBN’s cashless policy will be bolstered, while also creating an opportunity for commercial banks to collaborate with the telecommunication companies in electronically circulating unprecedented cash volumes. Even though the telecommunication networks will be facilitating transfer of cash value among users (and other payment destinations), the banks will still be the custodians of this cash. They will be able to shore up their cash holdings, lend more, and expand their operations. With mobile money, Nigerians will be incentivised to spend more money, and the banks just like Telcos, can cash in on this opportunity.

 

Editorial